Papa John's Chairman Schnatter Quits After Racial Remarks

Papa John's founder and CEO John Schnatter attends a meeting in Louisville, Ky. Schnatter is apologizing after reportedly using a racial slur during a conference call in May 2018. The apology Wednesday, July 11, 2018, comes after Forbes cited an anonymous source saying the pizza chain's marketing firm broke ties with the company afterward. less

Papa John's founder and CEO John Schnatter attends a meeting in Louisville, Ky. Schnatter is apologizing after reportedly using a racial slur during a conference call in May 2018. The apology Wednesday, July ... more

Photo: Timothy D. Easley, Associated Press

Photo: Timothy D. Easley, Associated Press

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Papa John's founder and CEO John Schnatter attends a meeting in Louisville, Ky. Schnatter is apologizing after reportedly using a racial slur during a conference call in May 2018. The apology Wednesday, July 11, 2018, comes after Forbes cited an anonymous source saying the pizza chain's marketing firm broke ties with the company afterward. less

Papa John's founder and CEO John Schnatter attends a meeting in Louisville, Ky. Schnatter is apologizing after reportedly using a racial slur during a conference call in May 2018. The apology Wednesday, July ... more

Photo: Timothy D. Easley, Associated Press

Papa John's Chairman Schnatter Quits After Racial Remarks

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(Bloomberg) -- The departure of Papa John’s International Inc. Chairman John Schnatter over his use of a racist slur comforted wary investors who’d fretted that the outspoken founder risked tarnishing the pizza maker’s reputation.

The independent directors of the company accepted Schnatter’s resignation late Wednesday, the restaurant chain said in a statement. Papa John’s will appoint a new chairman in the coming weeks, it said.

Shares of Louisville, Kentucky-based Papa John’s rose as much as 9.4 percent to $52.86 at 9:43 a.m. in New York Thursday.

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Just seven months after exiting the CEO role over critical comments about the National Football League’s national-anthem dispute, Schnatter came under pressure again on Wednesday following a media report that he used a racial slur and graphic descriptions of violence against minorities on a May conference call with a media agency.

Schnatter admitted to using an offensive racial term during the call and apologized, according to a separate statement earlier Wednesday.

“News reports attributing the use of inappropriate and hurtful language to me during a media training session regarding race are true,” Schnatter said in the earlier statement. “Regardless of the context, I apologize. Simply stated, racism has no place in our society.”

Reputational Risks

Papa John’s shares had dropped 4.8 percent on Wednesday, closing at the lowest level since February 2016, as investors worried about reputational risk. Through Wednesday’s close, the stock had lost almost 30 percent since Schnatter’s remarks about the NFL in November.

Schnatter apologized last year for comments he made when he criticized the NFL for its handling of players’ national-anthem protests, saying the outspoken opinion hurt the pizza chain’s sales.

The departure of Schnatter follows an inappropriate language case in June at Netflix Inc. The video-streaming giant fired its chief communications officer for using a racial slur more than once in a work setting. The executive, Jonathan Friedland, first used the N-word in discussing appropriate speech, and again later with human-resources executives.

Agency Exit

Forbes reported that the latest incident involving Papa John’s chairman took place on a May call arranged between company executives and Laundry Service, a media agency, as a role-playing exercise for Schnatter to prevent future public-relations missteps.

Laundry Service decided to cut ties after Schnatter’s behavior on the call, according to Forbes.

The company, owned by sports agency owner Casey Wasserman, told staff in a May 31 letter that it would be ending its work with an unnamed client due to “the regrettable recent events that several employees of Laundry Service witnessed during interactions with a client’s executive,” according to a copy of the letter obtained by Bloomberg News.

The agency didn’t name either the client or the executive in the letter. Laundry Service didn’t respond to requests for comment.

Internal Memo

Papa John’s CEO Steve Ritchie sent an internal memo to team members, franchisees and operators on Wednesday addressing the event, though without mentioning Schnatter by name.

“You may have read the media reports today tied to our company culture. We want to make it clear to all of you that racism has no place at Papa John’s,” according to the memo obtained by Bloomberg News.

“The past six months we’ve had to take a hard look in the mirror and acknowledge that we’ve lost a bit of focus on the core values that this brand was built on and that delivered success for so many years,” Ritchie said. “We’ve got to own up and take the hit for our missteps and refocus on the constant pursuit of better that is the DNA of our brand.”

(Updates share trading in third and seventh paragraphs.)

--With assistance from Matthew Boyle.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net